What insurance do you actually need: subtract before you buy

The people who sell insurance publish the arithmetic. It sits in a booklet, and it reads:

(Expected claim amount x probability) + expenses + profit + safety margin = premium

The booklet comes from Insurance Europe ↗ (opens in new tab), the insurers’ own European federation. Look at the right-hand side. First the expected cost of the bad thing. Then the cost of the firm selling it to you. Their profit after that. And a cushion on top of all three.

Is insurance a bet the house has told you, in writing, in advance, that you are going to lose?

On average, yes. Which is less of a scandal than it sounds. The cushion is there, in the federation’s own words, “to ensure the long-term viability of the insurer”. That’s the polite way of saying it pays for the year when every storm lands in the same fortnight. Take it out and you have a firm that honours claims right up until the week it can’t.

EU law makes an insurer’s own actuaries tell the board, in writing and at least once a year, whether the premiums will cover future claims and expenses ↗ (opens in new tab). Nobody signs off your premium before it’s charged, though: member states are barred from requiring approval of premium scales in advance ↗ (opens in new tab).

That booklet dates from 2012. Nothing in it has moved since, on account of being arithmetic.

The buying rule falls out of that, and the product pages have it backwards. Insuring against the likely is a poor trade. Insuring against the ruinous is a good one. That leaves four numbers standing between you and the insurance you need, and only one carries a price tag.

Your state pays you something when you stop earning. Your employer has quietly bought you something else and never mentioned the amount. Savings are the third. The fourth number is the premium on whatever the three leave uncovered.

What insurance do you actually need?

Sort by how bad the loss could get, not how often it happens. A loss you could pay out of savings is a nuisance with forms attached. One that stops you earning belongs in a different class, and only that kind is worth a premium. No share of your income answers this either: the right spend is whatever the surviving gap costs to cover, and that lands in a different place for everyone.

For that kind, four numbers, in this order. Amounts and duties differ by country.

1. Start with your state. How much does it pay you if you stop earning, and for how long? MISSOC, the European Commission’s country-by-country list, has both. Costs nothing.
2. Then your employer, if you have one. Email whoever runs the pension scheme and ask what it pays out if you die in service or can’t work. The scheme booklet or your member portal says the same thing, if you’d rather not ask a person. Costs nothing.
3. Then your own savings. A bank statement you already have. Costs nothing.
4. Only then the gap that survives. That means the quote, and the insurance product information document you ask for before you sign. This is the one step with a price on it, and the price is the premium.

The subtraction runs one way. It tells you what to buy, not what to cancel. A policy you skip today, you can buy tomorrow. A policy you cancel today, you may not be able to buy back.

Which is why step four needs one check ahead of it: whether the cover you’re counting on is actually available to you, and on what terms, before you treat it as the thing that fills the gap. A plan that depends on buying cover later is only a plan if you can still buy it.

BaFin ↗ (opens in new tab), the German regulator, calls private liability cover voluntary, unlike motor cover. Then it tells readers everyone should have one anyway. Regulators don’t usually go in for that sort of thing.

The Verbraucherzentrale ↗ (opens in new tab), Germany’s consumer body, gives the reason. Under German law you answer for all damage you cause someone else through your own fault, in unlimited amount. Unlimited. No cap, no annual maximum.

So the law forces you to cover the risk that comes with a legal minimum, and leaves the uncapped one to you. Being forced to buy cover and needing it are two different things.

That unlimited liability is German law. If your own country goes unnamed here, you haven’t been left out: the method still holds, and only the amounts and the duties change. Your national authority is where you check them.

There is one risk that outranks the rest for most working people, and it isn’t dying. It’s being unable to work for a long time while still needing to eat. Death ends the earnings. Long-term incapacity ends the earnings and keeps the costs.

Being 28 and in good health changes less here than you’d think. It makes one of them less likely, and it has no view at all on liability, which doesn’t ask about your medical history before a cyclist goes over your car door.

Run the insurers’ own formula backwards and it tells you what to skip. Where the worst case is a bill you’d pay without moving much else around, you’re buying the seller’s costs.

What does your state already pay when you stop earning?

Start here. It costs nothing to find out, and it moves the answer further than any policy can.

Germany again, because German law states its numbers instead of waving at them. An employee off sick keeps full pay from the employer for up to six weeks ↗ (opens in new tab), once four weeks into the job. After that the statutory health insurer takes over with Krankengeld, which runs at 70% of regular gross earnings and cannot exceed 90% of net pay ↗ (opens in new tab). The gross it counts stops at a monthly ceiling, so earnings above that don’t lift the payment.

And there’s an outer limit on the pair of them. For one and the same illness the employer’s six weeks and the Krankengeld that follows are capped together ↗ (opens in new tab) at 78 weeks in any three years ↗ (opens in new tab). The clock starts the day you stop being able to work, not the day the insurer takes over, so the six weeks count towards the 78 rather than sitting in front of them.

All of it sits in the law. The state catches you, then, and pays you less than your job did, with a cap on the amount and an outer limit on the time.

So ask your own country both questions, not one: how much, and for how long. Then ask what happens when that runs out. The gap those answers leave is the thing worth insuring, and it comes in a different size in every country.

Where do you look up what your own country pays?

The European Commission runs MISSOC ↗ (opens in new tab), which sets out what the state safety net pays, country by country: sickness, invalidity, survivors, unemployment. Updated twice a year. Not a thrilling website. But it’s where you find what your own country pays, before you go shopping for what it doesn’t.

Survivors is one of them. If someone depends on your income, what your state would pay them is a real number, and it’s in there.

Sickness and unemployment each get their own post: what sick pay looks like across Europe and what unemployment benefit pays, country by country.

One aside for anyone who has moved countries or means to. Which country pays you follows where you work and where you live, not which passport you hold ↗ (opens in new tab). If you commute across a border those are two different countries, and you cannot assume which one counts. And the European Health Insurance Card isn’t travel insurance. It excludes private care, planned treatment, and rescue and repatriation ↗ (opens in new tab). A helicopter off a mountain isn’t a thing the card does.

Does your employer already cover this?

Nobody enjoys this part. Do it anyway. It takes about four minutes and it’s the number most likely to change your answer.

What does your pension scheme pay if you die in service?

If you belong to a workplace pension scheme, it may carry a lump sum paid out if you die while still employed. It comes through the scheme, not through anything you chose, and the amount is a multiple of salary set by that scheme.

Ireland’s Pensions Authority ↗ (opens in new tab) shows it with a member on €40,000 covered for three times salary. That pays €120,000. The multiple belongs to the example, not to you. Which is why the Pensions Authority tells members to find out what their own scheme would pay.

So find it, then do the sum in the same sitting, because the number on its own changes nothing.

Take what your dependants would need to live on. Take away what the scheme pays them, and what the state pays them. What survives is the gap, and the gap is the only thing a policy has any business covering.

Run it yourself. Stick with the Irish number for shape: €120,000. Pick how many years that money has to cover, then divide. Over twenty years that is €6,000 a year, or €500 a month. Over thirty it drops to €4,000. Straight division, nothing earned on the balance. Three years of that member’s salary, asked to stretch across twenty or thirty years. The quote you get won’t show you that number.

Dutch pension providers got a warning from the AFM ↗ (opens in new tab), their regulator: under the country’s new survivor’s pension, scheme members may be under-insured or uninsured without knowing it. The cover stops when you leave the employer. Cover you didn’t choose, have never priced, and lose on the day you change jobs.

What does your employer buy for your health?

Some of this is bought for you already, if you work in France. Every private-sector employer must offer group health cover and must fund at least 50% of the contribution ↗ (opens in new tab). Italy has a version of this, but only where the bargaining bothered: the fondo sanitario integrativo, a top-up health fund that collective agreements can set up ↗ (opens in new tab). Neither turns up with a covering letter. If you don’t go looking, you won’t know it’s there.

In Spain, Portugal and Slovenia, ask your employer and read your collective agreement. We couldn’t find out what employers there commonly provide, and guessing wrong in either direction costs you.

If you work for yourself, this step is empty. Depending on where you live, step one can be empty as well: several European systems pay the self-employed no sick pay at all. In Ireland the social insurance the self-employed pay buys a pension and long-term invalidity cover, but no sick pay ↗ (opens in new tab). Short-term, that leaves your own cash. Check your status, not only your country.

Is private health insurance worth it if you already have state cover?

The honest answer starts with three numbers you don’t have yet. They’re what your state covers, what your employer has bought on top, and how big a hit your own savings could take. Without those three, “worth it” compares with nothing.

Whatever those three leave comes in one of two shapes, and the shapes take different answers. Some of it comes with a ceiling: a fixed amount you pay yourself before anything else pays out, set in advance and knowable today. The Dutch compulsory health deductible, €385 for 2026 ↗ (opens in new tab), is exactly that shape. That counts as a known bill, and the savings step handles known bills.

The rest carries no ceiling. A premium buys you the ceiling.

Check the gap is a gap before you fill it.

EIOPA, the EU’s insurance and pensions authority, reviewed travel cover in 2019 and found that overlaps between policies get sorted out at claim stage ↗ (opens in new tab), not during the sale. You learn you bought the same cover twice at the worst possible moment, which is when you claim. Every non-life policy sold in the EU has to come with a short summary that says in writing what isn’t insured. Ask for it before you sign, not after.

How much can your own cash take?

This test isn’t ours, and we won’t pretend it is. Germany’s Verbraucherzentrale Hamburg ↗ (opens in new tab) and Spain’s OCU ↗ (opens in new tab), both consumer bodies, print a version, and so does the Dutch household-budget institute Nibud ↗ (opens in new tab). Could you pay for this loss out of your own pocket, at a pinch? If yes, all three say, don’t insure it, unless the law requires it anyway. Insure what would break you.

The pot you are counting is also your emergency fund, and one pot does not stretch to two losses at once. And where the loss has no ceiling, which is the German liability case, no amount of savings is big enough to measure against it.

The dial for that is the excess, and it’s worth five minutes before you drag the slider. Which? ↗ (opens in new tab), the UK consumer body, points out that a compulsory excess sits under whatever voluntary excess you choose, so a claim costs you both.

In April 2026 it put a number on that: doubling a voluntary excess from £500 to £1,000 bought roughly £1 a year off the premium, and added £500 to what you’d owe on a claim. British study, British numbers.

If this step tells you to drop a policy you already hold, sort the replacement out before you cancel. The Dutch survivor’s pension shows how that goes wrong: cover ends on a date, the next starts on a date, and they aren’t the same date unless you line them up.

Sizing the buffer behind the test is its own question. So is what a redundancy package contains, before you work out how much income you’d need to replace.

What insurance is actually compulsory?

The pattern beats any list: compulsory cover protects other people from you, or something someone else has a claim over. Health is the exception, the base you subtract from rather than a purchase you weigh.

Only driving got an EU-wide floor, at least €6.45m per accident or €1.3m per injured party ↗ (opens in new tab), and national law can go higher. The rest is country by country. Rent in France and you must insure fire, water damage and explosion, on unfurnished, furnished and mobility leases alike ↗ (opens in new tab). In Portugal, fire cover on the building ↗ (opens in new tab) is compulsory for flats in a block with shared common parts. Fire cover, mind, not a general home policy.

Cover bought for a landlord, a lender, or a stranger you haven’t met, and none of them is you. Which makes it a poor guide to what else you need, and does not make it optional: where the law, a lease or a mortgage says you must, you must.

How do you check any of this without trusting a guide?

Until the end of 2023, Slovenian health guides told readers to buy dopolnilno zdravstveno zavarovanje, a top-up beside the state system. It was abolished on 31 December 2023 ↗ (opens in new tab), and from 1 January 2024 a compulsory contribution inside the state system replaced it.

Old policies didn’t run to term. They stopped being valid on the same date ↗ (opens in new tab), by law. A guide to Slovenian health cover written before 2024 describes a product that no longer exists. So does any model trained before then.

Use the tools, then, rather than the summaries. For state cover, MISSOC. For your employer, the scheme documents and your collective agreement. And for any policy sold in the EU there’s a document you may not know you’re owed.

What does an insurance product information document tell you?

Since 1 October 2018 ↗ (opens in new tab), every non-life policy sold in the EU comes with an Insurance Product Information Document ↗ (opens in new tab): two sides of A4, three at a push, nine headings, fixed by law. One heading reads “What is not insured?”. Another reads “Are there any restrictions on cover?”.

If your real question is whether they’ll pay when you claim, those two answer it better than any review. And they’re the same nine headings in every member state, in every language.

The formula at the top won’t change, because the federation that printed it has no reason to change it. Expected claim, expenses, profit, and the cushion that keeps the insurer standing in a bad year. Every policy you own is priced that way, which is why one earns its place only when the loss under it would flatten you. Find out what you already hold before you buy any more of it. Three of those four numbers are free, and not one of them is going to arrive on its own.